New Public REIT Sila Realty's Shares Soar Following NYSE Debut
There's a new publicly traded commercial landlord on the block, and it is already proving popular with investors.
Healthcare-focused net lease REIT Sila Realty Trust debuted on the New York Stock Exchange Thursday with a direct listing, and the company’s share price climbed by 19% on its first day of trading, reaching a closing price of $22.70, according to Seeking Alpha.
The company’s $2.1B portfolio of healthcare properties and its investment strategy, targeting assets net-leased to reliable healthcare operators such as Baylor Scott & White and the Cleveland Clinic Foundation, is what differentiates Sila from other REITs, CEO Michael Seton said.
“Becoming publicly traded on the NYSE will provide the Company with future access to scale capital through the public equity markets, which, we believe, will allow the Company to further grow its robust and diverse portfolio of healthcare assets,” Seton said in a statement.
Sila owns 137 properties, including buildings for medical outpatient, inpatient rehabilitation, surgical and specialty facilities. It launched its public trading era with $590M in liquidity and $500M available under its revolving credit facility, according to a release.
Seton told Yahoo Finance in an interview on Thursday that the company has only 20% leverage, compared to a typical REIT leverage ratio between 40% and 50%. Debt loads for REITs have caused concern among analysts, who have raised fears that their ability to pay off lines of credit could impact their biggest lenders.
“Obviously, leverage works very well going up, not great coming down. So we've never had that issue,” Seton said.
At the end of the first quarter, the company had a weighted average lease rate of 99.2%, with an average term of 8.4 years. Sila reported just more than two-thirds of its tenants, guarantors or affiliates were companies that have rated or investment-grade-rated credit.
The company, founded in 2014, has largely focused on net-leased healthcare deals, but it also previously held some tech assets. However, Sila has been shedding those properties in recent years, finishing up the process with a $1.3B sale of its data centers in 2021.
Investor demand for healthcare REITs is strong compared to most commercial property types. Investor returns from healthcare REITs were essentially flat through April, according to data compiled by Nareit, compared to the average of all equity REITs, which posted a negative return of more than 9% in the same period.
At the same time, competition is weaker than it was three years ago, Seton said, positioning Sila for growth. It is targeting an enterprise value of $3B, the company said in the release.
After a major rally in its shares during its first day on the NYSE, shares in Sila Realty, which now trades under the ticker SILA, held on to their gains with a mostly flat day of trading Friday.
